Proposal would give timeline to Act 47 municipalities

HARRISBURG - Failed municipalities would be stripped of their identities and run by appointed advisers if recommendations made this week by an Act 47 rewrite task force become law.

An "unincorporated service district" would be different from other local governments as a state entity. The district would be run by an administrator, have a resident advisory committee but no elected officials and levy an assessment on property owners to pay for essential services.

Lawmakers on the Act 47 Municipal Fiscal Distress Task Force say they believe that few service districts would be created, but they spent a lot of time this summer devising a process for establishing one.

Candidates

A small borough that has seen massive population loss and business flight is the most likely candidate for "disincorportation," said Sen. John Eichelberger, R-Hollidaysburg, and Rep. Chris Ross, R-Unionville, the task force co-chairmen.

This would only emerge as an option after a municipality under Act 47 status has gone through a new eight-year exit strategy envisioned by the task force. This calls for a municipality to be in the Act 47 program for only five years instead of an unlimited duration and then follow a defined three-year exit plan. The proposal would give Act 47 municipalities temporary additional tax options to shift revenue sources and stabilize their finances. If fiscal solvency can't be achieved after that, even if a municipality reorganizes its debts through bankruptcy protection, then disincorporation would provide a way to wind down the municipality's business affairs, obligations and assets, lawmakers said.

This new idea is a recognition by policymakers that state laws to encourage voluntary municipal mergers or consolidations have seen limited use in recent decades. In many cases, residents of communities, no matter how small or deep in fiscal trouble, are reluctant to give up their municipal identity. Merger proposals have been defeated because residents of a more prosperous municipality were reluctant to take on the debts and expenses of a troubled neighbor.

Process

Disincorporation would start when the state Department of Community and Economic Development secretary determines a municipality isn't viable any longer because of inability to provide essential services and collect adequate taxes and merger is not an option.

Once that decision is made, the process would move forward if the municipality enacts an ordinance, voters submit a petition to the county court or the DCED secretary petitions the court if the others don't act.

The court would then hold a hearing before deciding whether to grant a petition.

That would pave the way for establishing the unincorporated service district with a state-appointed administrator. The administrator would draw up a plan to provide essential services to residents, levy a property assessment to pay for them, lease or sell municipal property, pay debt and set governing standards in such areas as public conduct and parking in place of the former municipal ordinances.

A property assessment could be no higher than 5 percent of the total taxes levied by the former municipality in its final year under this proposal.

The pension benefits of current and past municipal employees would be protected under the proposal through the transfer and administration of the municipal pension plan to a private or public pension fund. Pension benefits due those employees couldn't be modified under a service district.

As one of its final acts, the old municipality would appoint a three-member service district advisory committee.

The proposal enables a service district to re-emerge as a new municipality in the event of a future population influx or economic growth or become part of another municipality.

The hope is the service district would be a bridge to something else, said Rep. Robert Freeman, D-Easton, a task force member.

rswift@timesshamrock.com

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